Reliance to clock $20 bn in EBITDA by 2022-end, says Morgan Stanley

High refining margins, gas prices and telecom ARPUs key contributors; stock falls nearly 4 per cent on Monday

A refining golden age, tightening global gas markets and improving telecom subscriber quality would help Reliance Industries (RIL) clock earnings before interest, tax, depreciation and amortisation (Ebitda) of over $20 billion by the end of calendar year 2022, brokerage firm Morgan Stanley said on Monday.

The uptick in Ebitda could help the company improve its market capitalisation by $50 billion in the period, the brokerage said, adding that refinery margins for RIL could nearly double and sustain for the next half decade.

The forecast by the brokerage came even as the RIL stock declined nearly four per cent on Monday, closing trade at Rs 2,517.15 a share on the BSE. In the last one week, the stock has fallen by nearly 10 per cent in a volatile market, though year-to-date, the stock has grown 6.3 per cent, data compiled by BS Research bureau shows.

RIL had recently touched $250 billion in market capitalisation, becoming the first Indian company to do so. On Friday, the company touched $100 billion in gross sales in the financial year ended March 31, 2022 (FY22), though net revenue excluding GST and excise duty stood at$91 billion, its results showed.

RIL's FY22 Ebitda came in $16.6 billion, a year-on-year growth of nearly 29 per cent, while net profit surged 26 per cent YoY to $8.8 billion, led by oil to chemicals (O2C), telecom and retail.

“RIL is producing 18 million metric standard cubic meters per day (mmscmd) of gas from its Krishna Godavari (KG) basin, which we expect to rise to 30 mmscmd peak production over the next two years, with increases starting in January 2023. Rising production, along with a tailwind from elevated global gas prices, could increase RIL’s upstream profitability multi-fold over the coming years,” the brokerage said.

Gas price for RIL’s KG gas fields rose to $9.9 per metric million British thermal units (mmBTU) in April from $6.13 mmBTU in the March quarter, Morgan Stanley said, with the firm expecting further increases in the next six months. “This should help nearly double Ebitda by end-2022,” the brokerage said.

Also, rising traction for digital commerce with 193 million subscribers and a consistent 20 per cent revenue contribution could expand margins, it said.

RIL’s FY22 capital expenditure of $13 billion increased 25 per cent year-on-year, which the brokerage said would sustain over the next few years.

About 30 per cent of the capex was in telecom, 20 per cent in oil to chemicals, 30 per cent in retail, and 11 per cent in new energy.